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Corn At Highest Price Since Early July
DR. AARON SMITH
KNOXVILLE, TENN.
Corn, cotton, soybeans, and wheat were up for the week. Corn producers may want to consider pricing some of their 2015 production as December corn is currently at $4.31/bu, which is the highest price since early July and above many breakevens. The December WASDE released on Wednesday contained limited new information and no major surprises. U.S. corn ending stocks were decreased 10 million bushels to 1.998 billion for the 2014/15 marketing year. While total foreign stocks were increased 38 million bushels to 5.569 billion bushels. Season average farm price was left unchanged at $3.20-$3.80/bu. Soybean exports were increased 40 million bushels, decreasing estimated ending stocks to 410 million bushels for the 2014/15 marketing year. Estimated foreign ending stocks were increased 25 million bushels to 2.892 billion bushels. Season average farm price was left unchanged at $9.00-$11.00/bu. Average US cotton yield was decreased 24 lbs/acre resulting in a 480,000 bale decrease in domestic production and ending stocks. Foreign ending stocks were increased 1.22 million bales from the November estimate. This results in a total estimated carryover into the 2015/16 marketing year of 103.48 million bales or roughly 9 million bales less than global cotton use for the 2014/15 marketing year. The lower end of the cotton price range was raised three cents to $0.59 to $0.64/lb. Wheat imports and ending stocks were both increased 10 million bushels primarily due to greater Canadian production. Estimated foreign ending stocks were raised 63 million bushels and average US farm price was increased to $5.80-$6.20/bu.
Last year the USDA reduced ending stocks from the December 2013 WASDE report (to current estimates) for both corn (1.792 to 1.236 billion bushels) and soybeans (150 to 92 million bushels). For soybeans, greater than estimated exports (1.647 versus 1.475 billion bushels) and domestic crushing (1.734 versus 1.69 billion bushels) precipitated the lower ending stocks. For corn, exports (1.917 versus 1.45 billion bushels) and ethanol use (5.134 versus 4.95 billion bushels) were the primary contributors. Will we see similar adjustments as we enter and move through 2015? Perhaps, but at this point it seems unlikely baring a significant production disruption in South America or accelerated Chinese demand.
Corn
March 2015 corn futures closed at $4.07 up 12 cents a bushel since last week with support at $3.92 and resistance at $4.17. Across Tennessee average basis (cash price- nearby future price) strengthened in Northwest and Lower-middle Tennessee and weakened in Memphis, Northwest Barge Points, and Upper-middle Tennessee. Overall average basis for the week ranged from 25 under to 31 over the March futures contract with an average of 3 over at the end of the week. Ethanol production for the week ending December 5th was 988,000 barrels per day up 26,000 barrels per day from last week. Ending ethanol stocks were 17.75 million barrels up 461,000 barrels from last week. This week March 2014 corn futures prices traded between $3.87 and $4.10. Mar/May and Mar/Sep future spreads were 8 cents and 17 cents, respectively.
May 2015 corn futures closed at $4.15. Corn net sales reported by exporters from November 28th to December 4th were within expectations with net sales of 37.9 million bushels for the 2014/15 marketing year. Exports for the same time period were down from last week at 26.7 million bushels. Corn export sales and commitments were 53 percent of the USDA estimated total annual exports for the 2014/15 marketing year (September 1 to August 31) compared to a 5-year average of 54 percent. September 2015 cash forward contracts averaged $3.99 with a range of $3.78 to $4.27. September 2015 futures closed at $4.24 up 10 cents from last week. Downside price protection could be obtained by purchasing a $4.30 September 2015 Put Option costing 40 cents establishing a $3.90 futures floor.
Soybeans
January 2015 soybean futures closed at $10.47 up 11 cents for the week with support at $10.21 and resistance at $10.66. Jan/Mar soybean to corn price ratio was 2.57 at the end of the week. For the week, average soybean basis weakened at Memphis, Northwest, Northwest Barge Points, Upper middle, and Lower-middle Tennessee. Basis ranged from 4 under to 101 over the January futures contract at elevators and barge points. Average basis at the end of the week was 20 over the January futures contract. This week January 2015 soybean futures traded between $10.25 and $10.60.
March 2015 soybean futures closed at $10.53 up 11 cents for the week. Net sales reported by exporters were within expectations with net sales of 29.8 million bushels for the 2014/15 marketing year. Exports for the same period were up from last week at 88.6 million bushels. Soybean export sales and commitments were 84 percent of the USDA estimated total annual exports for the 2014/15 marketing year (September 1 to August 31), compared to a 5-year average of 77 percent. Export sales and commitments reflect the 40 million bushel increase from the December 10th WASDE report. Jan/Mar and Jan/Nov future spreads were 6 cents and -28 cents. October/November 2015 cash forward contracts averaged $9.95 with a range of $9.64 to $10.20. Nov/Sep 2015 soybean to corn price ratio was 2.40. November 2015 futures closed at $10.19. Downside price protection could be achieved by purchasing a $10.20 November 2015 Put Option which would cost 74 cents and set a $9.46 futures floor.
Cotton
March 2015 cotton futures closed at 60.54 cents up 0.9 cents for the week with support at 59.91 and resistance at 61.57. Cotton adjusted world price (AWP) increased 0.09 cents to 46.45 cents. March 2015 cotton futures traded between 59.16 and 61.25 cents this week.
May 2015 cotton futures closed at 61.07. Net sales reported by exporters were up from last week at 199,200 bales for the 2014/15 marketing year. Exports for the same period were up from last week at 193,200 bales. Upland cotton export sales were 75 percent of the USDA estimated total annual exports for the 2014/15 marketing year (August 1 to July 31), compared to a 5-year average of 73 percent. Mar/May and Mar/Dec futures spread were 0.53 cents and 3.96 cents. December 2015 cotton futures closed at 64.5 up 0.61 cents for the week. Downside price protection could be obtained by purchasing a 65 cent December 2015 Put Option costing 4.90 cents establishing a 60.1 cent futures floor.
Wheat
March 2015 wheat futures closed at $6.06 up 12 cents from last week with support at $5.84 and resistance at $6.24. In Memphis, old crop cash wheat traded between $5.86 and $6.07 for the week. March wheat futures traded between $5.73 and $6.13 this week. March wheat to corn price ratio was 1.49. Mar/May and Mar/July future spreads were 2 cents and 1 cent.
May 2015 wheat futures closed at $6.08. Net sales reported by exporters were within expectations at 16.3 million bushels for the 2014/15 marketing year and 3.1 million bushels for the 2015/16 marketing year. Exports for the same period were down from last week at 12.2 million bushels. Wheat export sales were 69 percent of the USDA estimated total annual exports for the 2014/15 marketing year (June 1 to May 31), compared to a 5-year average of 70 percent. June/July 2015 cash forward contracts averaged $5.82 with a range of $5.28 to $6.14 at elevators and barge points. July 2015 wheat futures closed at $6.07 up 5 cents for the week. Downside price protection could be obtained by purchasing a $6.10 July 2015 Put Option costing 46 cents establishing a $5.64 futures floor. ∆
DR. AARON SMITH: Assistant Professor, Crop Marketing Specialist, University of Tennessee
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